Monetary Policy Inertia or Persistent Shocks?

Julio Carrillo, P. F ve and Julien Matheron
Authors registered in the RePEc Author Service: Patrick Fève

Working papers from Banque de France

Abstract: In this paper, we propose a simple econometric framework to disentangle the respective roles of monetary policy inertia and persistent shocks in interest rate rules. The procedure exploits the cross-equation restrictions provided by a DSGE model which is confronted to a monetary SVAR. We show that, provided enough informative variables are included in the formal test, the data favour a monetary policy representation with low inertia and highly serially correlated monetary shocks. To the contrary, when the procedure is based solely on the dynamic behavior of the nominal interest rate, no clear-cut conclusion can be reached as to the correct representation of monetary policy.

Keywords: Taylor rule; Monetary policy identification; Policy Inertia. (search for similar items in EconPapers)
JEL-codes: C52 E31 E32 E52 (search for similar items in EconPapers)
Pages: 63 pages
Date: 2006
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Related works:
Journal Article: Monetary Policy Inertia or Persistent Shocks: A DSGE Analysis (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:150

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